Friedman Industries(FRD) - 2019 Q4 - Annual Report

PART I Business Overview Friedman Industries, established in 1965, manufactures and processes steel products through coil and tubular segments, serving various industries with significant sales to a single customer in a competitive market - The company operates in two reportable segments: coil products and tubular products[13] - The coil product segment operates two hot-roll coil processing facilities in Hickman, Arkansas, and Decatur, Alabama, which improve steel quality and cut coils into sheets and plates[14] - The tubular product segment, Texas Tubular Products (TTP), operates two electric resistance welded pipe mills in Lone Star, Texas, manufacturing API-licensed line pipe and oil country pipe[17] Percentage of Total Sales by Product Group | Product and Service Groups | 2019 | 2018 | | :--- | :--- | :--- | | Coil Products | 67% | 74% | | Tubular Products | 33% | 26% | - Sales to a single customer, Trinity Industries, Inc., accounted for a significant portion of the company's total sales, representing approximately 21% in fiscal 2019 and 16% in fiscal 2018[20] - The company operates in a non-seasonal, highly-competitive business, competing with other processors of hot-rolled steel coils[24] - As of March 31, 2019, the company had 104 full-time employees[26] Risk Factors Disclosure of risk factors is not required for this filing - Disclosure of risk factors is not required[28] Unresolved Staff Comments The company reports no unresolved staff comments - The company has no unresolved staff comments[29] Properties The company's principal real properties include owned manufacturing plants and offices in Texas, Arkansas, and Alabama, alongside leased office space in Longview, Texas Principal Properties | Location | Facility | Size (sq. ft) | Ownership | | :--- | :--- | :--- | :--- | | Lone Star, Texas | Plant, Offices, Land | 161,000, 12,200, 122.4 acres | Owned | | Hickman, Arkansas | Plant, Offices, Land | 42,600, 2,500, 26.2 acres | Owned | | Decatur, Alabama | Plant, Offices, Land | 48,000, 2,000, 47.3 acres | Owned | | Longview, Texas | Offices | 2,600 | Leased | - All owned real properties are held in fee and are not subject to any mortgage or deed of trust[30] - The leased office in Longview, Texas has a lease expiring on April 30, 2021, with a monthly rent of $2,728[31] Legal Proceedings The company received $56,500 in fiscal 2019 from a completed steel antitrust class action settlement, with no other material pending legal proceedings - In fiscal 2019, the company received settlement proceeds of $56,500 as a class member of steel antitrust class action litigation, which is now considered complete[32] - The company is not a party to any other material pending legal proceedings[33] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on NYSE American under 'FRD', with approximately 190 shareholders of record as of April 26, 2019, and other stock information incorporated by reference - The Company's Common Stock is traded on the NYSE – American under the symbol FRD[35] - As of April 26, 2019, the company had approximately 190 shareholders of record[37] Selected Financial Data Disclosure of selected financial data is not required for this filing - Disclosure of selected financial data is not required[38] Management's Discussion and Analysis of Financial Condition and Results of Operations This section is incorporated by reference from the company's Annual Report to Shareholders for the fiscal year ended March 31, 2019 - The Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated by reference from the Annual Report to Shareholders for the fiscal year ended March 31, 2019[39] Quantitative and Qualitative Disclosures about Market Risk Quantitative and qualitative disclosures about market risk are not required for this filing - Disclosure about market risk is not required[40] Financial Statements and Supplementary Data Consolidated financial statements for fiscal years 2019 and 2018, including the independent auditor's report, are incorporated by reference from the Annual Report to Shareholders - The Consolidated Balance Sheets, Statements of Operations, Stockholders' Equity, Cash Flows, and Notes to Consolidated Financial Statements for the years ended March 31, 2019 and 2018 are incorporated by reference[41] - Schedule II — Valuation and Qualifying Accounts for the years ended March 31, 2019 and 2018 is included elsewhere in the report[42] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[43] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the fourth fiscal quarter - Based on an evaluation as of the end of the reporting period, the CEO and principal financial officer concluded that the company's disclosure controls and procedures were effective[44] - There were no changes in the company's internal control over financial reporting during the fiscal quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, these controls[46] Other Information The company reports no other information to disclose under this item - There is no information to report under this item[47] PART III Directors, Executive Officers and Corporate Governance Information on directors and corporate governance is incorporated by reference from the 2019 Proxy Statement, executive officers from Item 1, and the company has adopted a Code of Conduct and Ethics - Information regarding directors and corporate governance is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[50] - Information regarding executive officers is incorporated by reference from the section 'Executive Officers of the Company' in Item 1 of this report[51] - The company has adopted the Friedman Industries, Incorporated Code of Conduct and Ethics[52] Executive Compensation This section on executive compensation is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement - Information regarding executive compensation is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[53] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and equity compensation plan information is incorporated by reference from the 2019 Proxy Statement and Notes to Consolidated Financial Statements - Information regarding security ownership and related matters is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[54][56] Certain Relationships, Related Transactions and Director Independence This section is incorporated by reference from the company's proxy statement for the 2019 Annual Meeting of Shareholders - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[57] Principal Accountant Fees and Services This section is incorporated by reference from the company's proxy statement for the 2019 Annual Meeting of Shareholders - Information regarding principal accountant fees and services is incorporated by reference from the 2019 Annual Meeting of Shareholders proxy statement[58] PART IV Exhibits and Financial Statement Schedules This section lists documents filed with the Form 10-K, including financial statements, a schedule for valuation and qualifying accounts, and various exhibits like corporate governance documents and certifications - The financial statements and notes from the Annual Report to Shareholders for the fiscal year ended March 31, 2019, are incorporated by reference[60] - The report includes Schedule II — Valuation and Qualifying Accounts[60] - A list of 21 exhibits is provided, including Articles of Incorporation, loan agreements, the Code of Conduct and Ethics, and Sarbanes-Oxley certifications[61] Signatures The Form 10-K report was authorized and signed on July 1, 2019, by the company's principal executive and financial officers and a majority of the board - The report was signed on July 1, 2019, by Michael J. Taylor, Interim President and Interim Chief Executive Officer, and Alex LaRue, Chief Financial Officer, along with the company's directors[66][67] SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS This schedule details activity in the allowance for doubtful accounts and cash discounts for fiscal years 2019 and 2018, with the ending balance increasing to $29,178 in 2019 from $21,052 in 2018 Allowance for Doubtful Accounts and Cash Discounts | Fiscal Year Ended | Beginning Balance ($) | Additions (Costs & Expenses) ($) | Additions (Other Accounts) ($) | Deductions ($) | Ending Balance ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | March 31, 2019 | $21,052 | $— | $765,732 | $757,606 | $29,178 | | March 31, 2018 | $27,276 | $— | $425,140 | $431,364 | $21,052 | - For fiscal year 2019, additions to the allowance included $15,673 for bad debt expense and $750,059 for cash discounts allowed on sales, while deductions included $7,547 in accounts receivable written off and $750,059 in cash discounts taken[69][70]